Automotive companies are moving in to the Guanajuato Inland Port located in Leon.

Guanajuato's Gusto

Guanajuato is Mexico's sixth most populated state with more than 5 million people. During the last decade, it has developed an automotive cluster composed of approximately 60 significant manufacturing operations and nearly 25,000 employees. Much of the growth has come during the past few years. It has one OEM, GM's assembly plant in Leon Metropolitan Zone, a 1.2-million-sq.-ft. (111,480-sq.-m.) plant that employs more than 2,700.

American Axle & Manufacturing, which began operations in 2000 and has since expanded, is the largest of Guanajuato's Tier One automotive suppliers. The company has invested US$800 million in its operations and employs 3,000.

German auto transmission manufacturer Getrag and its joint venture partner Getrag Ford are building a new $500-million plant. The project is part of Getrag's effort to introduce its dual clutch transmission technology globally.

The plant, which will be operational in late 2009 or early 2010, may eventually employ up to 1,300 if the company proceeds with a planned second phase. The first phase will be a 484,650-sq.-ft. (45,000-sq.-m.) modular building. The second phase would double the facility.

"This was quite a long process as we have a complex set of business criteria in our site selection process," says Norbert Buechelmaier, executive vice president of manufacturing. "We started visiting with our team of manufacturing engineers and HR people in September 2005, and we visited 22 sites in Mexico."

The final choice came down to Guanajuato or Queretaro. But before the deal with the State of Guanajuato was signed, word came of an existing building in Durango. Buechelmaier says Getrag looked at the building, but subsequently stayed with its original decision.

Buechelmaier says Getrag's sophisticated site search process, honed by similar searches in Europe and China, includes evaluating factors such as site conditions, logistics, infrastructure, security and safety, labor costs and incentives.

Buechelmaier says Getrag's plant will begin with 400 workers in assembly operations. Long-range plans call for that number to grow as high as 1,300 as the operation moves into production of gears and shafts over the next several years. Labor availability and labor costs were also important factors, but not deciding factors, Buechelmaier says.

"We expect labor rates to increase over the next five years, but the turnover and absenteeism rates are very favorable. Basically, we considered the area to be quite stable as a union situation."

Guanajuato Inland Port Drawing Investment

The Guanajuato Inland Port, located between in Leon, is another major site of automotive investment. Toyota subsidiary Hino Motors Manufacturing Mexico held groundbreaking ceremonies on Oct. 16 for its new truck manufacturing facility. Hino is investing $9 million and expects to begin production in August 2009.

French firm Faurecia is one of the latest to locate there, investing $25 million in a 700-employee facility to manufacture exhaust systems.

Other recent automotive investments have come from Samot, a Brazilian firm that makes high-precision machined parts for automotive companies, and Mailhot Industries, a French manufacturer of industrial cylinders.

The Inland Port, located adjacent to Bajio International Airport (Leon/BJX), also includes an intermodal facility with rail and major highway access. It also includes Mexico's largest custom house, a 77-acre (31-hectare) facility.

French firm Faurecia completed an exhaustive search before locating their 700-employee facility in Guanajuato.

Fortuitous Geography

Criss says Guanajuato is well placed, located in the middle of Mexico's major OEM operations, including GM's new plant in the neighboring state of San Luis Potosi.

"There's Nissan up the road to the north [Aguascalientes] and the cluster around Mexico City is right there," Criss says of Guanajuato's juxtaposition. "It's also in good road position to link up to Monterrey."

Criss says Guanajuato is one of the most aggressive Mexican states in terms of incentives.

"It's a fairly wealthy state. It's where [former Mexican President Vicente] Fox is from. He was governor there and he got things started with incentives. The governors that have followed have continued in that vein."

The recent spate of automotive investment in the central states notwithstanding, the precarious situation of the Big Three, especially GM, is already slowing growth.

"The cars they [GM] decided to make in Mexico are the big ones, and they are exactly the ones getting hammered. But unless they truly go out of business, they won't shut down in Mexico," Criss says. "They might have to retool. All of this is rippling down the supply chain. A lot of companies that have had projects to move to Mexico have just stopped and everything is on hold. The OEMs and suppliers I talk to consider their Mexico facilities to be their core facilities. If they have three facilities in Mexico and one in the U.S., the one in the U.S will be the one to go. U.S. OEMs have been in a race for a long time to get as many jobs into Mexico as they could before union and legacy costs drag them down."